Kolkata: A business group that takes public deposits to produce solar lanterns and panels is waging a legal battle against ABP Pvt. Ltd, laying claim to a Bengali-language general entertainment channel run by eastern India’s biggest news company.

Kolkata-based NVD Entertainments Ltd, which is part of the NVD Solar group, approached the Calcutta high court after a deal with ABP, publisher of the Bengali-language Anandabazar Patrika and English daily The Telegraph, for the takeover of the channel turned sour.

NVD had in September signed a so-called memorandum of understanding (MoU), or in-principle agreement, with ABP to buy Sananda TV, which shares the name of a women’s magazine published by the news company. The channel, launched in July 2011, was to be renamed NVD Sananda.

Under the deal, NVD was allowed to use the Sananda brand for up to three years, according to people familiar with the agreement. These people, who did not want to be identified, said they were surprised by ABP’s decision to share the goodwill—an accounting term meaning the intangible value of an asset—of Sananda with a little known company.

The deal seems to illustrate some missteps by the publishing company, analysts said. The group launched Sananda TV although its existing investments in news channels hadn’t made any money; general entertainment channels require hefty investment. Then ABP, which pumped in at least Rs.65 crore into the venture, tried to cut its losses by signing the deal with a company that had nothing to do with broadcasting.

Finally, the publisher decided to get out of the deal and pulled the plug on Sananda TV.

“It is ironical that ABP Ltd was the last to launch an entertainment channel in a market that it has been operating in for such a long time. Also, it lost steam very quickly because it is a very competitive market,” said the top executive of a broadcaster with a significant presence in the market.

Some half-a-dozen Bengali channels are on air, with only half of them making money, the executive said. Including news and entertainment channels, the Bengali broadcasting industry earns some Rs.850 crore in annual advertising revenue, he estimated.

The takeover of Sananda TV, which was to be concluded by December, was announced through full-page advertisements in the ABP flagship Anandabazar Patrika.

Goldvision was earlier called ABP Entertainment Pvt. Ltd—its name was changed in June on the advice of an astrologer to improve its prospects, according to filings with the registrar of companies (ROC).

The name was changed because ABP was looking to sell Sananda TV, according to the people cited above, and it couldn’t sell a company with Anandabazar Patrika’s acronym in its name.

In line with the MoU, NVD Entertainments’ nominees were allowed to join the board of Satellite Holdings on 19 September, show filings with the ROC.

But within a month of signing the MoU, ABP called off the deal with NVD Entertainments and advertised through its newspapers in the middle of October that the telecast of Sananda TV would stop from 7 November. In a subsequent advertisement, it said NVD Entertainments had nothing to do with Sananda TV.

The channel was pulled off the air on Wednesday amid claims by NVD Entertainments that ABP couldn’t unilaterally terminate the MoU.

Armed with this 16-page document, NVD Entertainments has moved the Calcutta high court, seeking to restrain ABP from terminating the deal, as also the Union government from revoking Sananda TV’s licence.

Hearings on the dispute started in the Calcutta high court on Thursday. Justice Soumen Sen posted the next hearing for 6 December.

ABP launched Sananda TV to take on Star Jalsha, the leading Bengali general entertainment channel by viewership. Star India Pvt. Ltd didn’t take kindly to ABP’s entry into the general entertainment space, and according to Star TV officials who didn’t want to be named, it was one of the key reasons why it decided to end its partnership with ABP on news channels in Bengali, Hindi and Marathi.

Star India chief operating officer Sanjay Gupta, however, said the parting of ways had nothing to do with the launch of Sananda TV.

“Our decision to separate from ABP in the news business had nothing to do with their decision to launch a general entertainment channel. News as a category is struggling. A lot of money is required to be invested in a news channel. It did not make strategic sense for us to continue in this genre. ABP was the majority shareholder at 75% and to keep pumping money in a news channel is not easy.”

Sananda TV was launched with at least three hours of so-called original programming—a striking departure from the norm of slowly scaling up the production of original software based on audience feedback, according to a former Sananda TV programming executive, who, too, did not want to be named. ABP spent heavily on these software, but the programmes were not received well by the audience.

“In the GEC (general entertainment channel) space, leadership is critical to make money,” Gupta said about Sananda TV and Star’s own Jalsha channel. “Star Jalsha has been the market leader for the last three years. We broke even in the first year. We run a profitable operation because we have been the number one channel in Bangla entertainment. We do roughly 500 GRPs (gross rating points) a week. Sananda may be 50-60 GRPs a week. In GEC, only the top two or three channels make money, the rest bleed.”

According to executives at media buying agencies who didn’t want to be identified, the rate for a 10-second commercial on Sananda TV costs as low as Rs.2,000, compared with Rs.25,000-Rs.35,000 that Star Jalsha charges. Zee Bangla charges around Rs.20,000 per 10-second ad spot and ETV Bangla around Rs.5,000, they said.

Sananda TV is the second Bengali channel to have shut this year. Mahuaa Bangla, a general entertainment channel launched in 2010 by Mahuaa Media Pvt. Ltd, was the first.

“Since last year, advertising revenues have been almost flat and subscription revenue hasn’t really kicked-off...,” said a media analyst at a leading audit and consulting company who didn’t want to be named. “And given the current market, advertisers prefer putting their ad spends on leading channels, which has made it difficult for mid-level channels to sustain.”

In February-March, ABP announced internally that Sananda TV would either be sold or closed. A search for potential buyers was launched around that time with the aim of paring losses—ABP wanted Sananda TV’s loans to be taken over even if it couldn’t fully recover its contribution in the form of equity capital.

RoC filings show the ABP group and/or its promoters had pumped in at least Rs.65 crore into Goldvision Entertainment in the form of equity, and according to people familiar with the ABP-NVD Entertainments transaction, Sananda TV had a liability of around Rs.150 crore when the MoU was signed in September.

The refusal of lenders to transfer credit facilities offered to Goldvision, to NVD Entertainment may have scuppered the deal, said people familiar with the situation.

NVD Entertainments had initially agreed to take over the liabilities of Goldvision Entertainments, assessed by it at around Rs.150 crore, despite being advised against taking over Sananda TV by a consulting firm, according to one of the people mentioned in the first instance.

Another version goes that ABP pulled the plug on the deal after cheques with which NVD Entertainments was to make the first tranche of payment were dishonoured either for paucity of funds or at the advice of the issuer.

Mint couldn’t independently verify any of these versions.

Shuchi Bansal in New Delhi and Aminah Sheikh in Mumbai contributed to this story.